Corda Will Support Digital Currencies, R3 Confirms
Though it has no native cryptocurrency, R3’s Corda will support digital currencies on its platform later as it churns out more beneficial products for the financial sector.
Corda was used by R3 and over 15 of its consortium member banks to successfully complete two prototypes that demonstrate how distributed ledger technology can address the key challenges facing the $45 billion global trade finance industry.
The spokesperson says to Cointelegraph:
“The prototypes didn’t require native currencies, but the products we are developing will be designed to support existing fiat currencies and native digital currencies.”
What is Corda?
Corda is a distributed ledger platform designed from the ground up to record, manage and synchronise financial agreements between regulated financial institutions. It is built on industry-standard tools, supports a variety of consensus mechanisms and has no native cryptocurrency.
The banks designed and utilised self-executing transaction agreements, known as smart contracts, on the platform to process accounts receivable (AR) purchase transactions, also known as invoice financing or factoring, and letter of credit (LOC) transactions.
Both AR and LOC transactions are widely used methods of trade financing in global financial markets. According to the spokesperson, the prototypes produced findings that can be rolled into new products some of which could be ready for production and use in 2017.
They will be available to all interested users and not just for the member banks that participated in the trial - Barclays, BBVA, BNP Paribas, Commonwealth Bank of Australia, Danske Bank, ING Bank, Intesa Sanpaolo, Natixis, Nordea, Scotiabank, UBS, UniCredit, U.S. Bank and Wells Fargo.
On the choice of designing prototypes to process AR and LOC transactions and not any other form of transactions, the spokesperson says AR and LC transactions contain most of the essential elements of other trade finance transactions and both prototypes provided extremely valuable learnings that can be applied to the broad range of other transactions types.
The writer notes via email:
“AR finance, for example, both intercompany and bank lead, accounts for over 70% of global trade finance, and is at the core of the growing open account business and “supply chain finance”. The LC prototype, despite being designed around a traditional unloved product, is still a core trade services product offered by leading banks in the global trade industry and provided valuable feedback in the area of transaction speed and cost savings.”
Saving time and reducing fraud risk
Traditional processes surrounding trade finance are largely paper-based, time consuming and prone to risk and fraud. These inefficiencies undermine trade which is a significant source of revenue for banks.
However, with this technology, estimates suggest that it has the scope to reduce operational and compliance costs of paper-based trade financing by 10 to 15% and provide a platform for banks to grow revenues by as much as 15%.
Distributed ledger technology’s ability to provide a single, immutable record of a trade, verified by all parties involved in a transaction provides several benefits for trade financing which include reducing fraud risk and removal of time-consuming reconciliation processes.